Socially Responsible Investment

[Sapphire Capital]

Socially Responsible Investment: Explaining its Uneven Development and Human Resource Management Consequences

Peter Waring

Tony Edwards
King's College London



Corporate Governance: An International Review, Vol. 16, Issue 3, pp. 135-145, May 2008


Abstract:
Implications for SRI fund managers are considered, especially how they might use the notion of institutional complementarities to help in their investment decisions and in the impact they can exert. Specifically SRI funds are likely to be more effective where they can form alliances with other existing bodies or where they spur the development of such bodies. The implications for other actors in HRM and corporate governance are also considered.The notion of institutional complementarities, within and across spheres of a corporate governance system is a useful theoretical lens for understanding the varied impact of SRI across different corporate governance systems. Further, future studies of HRM will need to consider the heterodox pressures produced by SRI that may influence its conduct. We map the nature and extent of SRI equities across five industrialized countries Germany, Japan, the UK, the US and Australia. We find that differences between the institutional, corporate governance and cultural characteristics of national business systems explain variations in the size and significance of SRI across countries. We also find that SRI has an impact on HRM in institutional contexts such as where its influence is complemented by strong employee voice institutions. In this paper we address two research questions. First, to what extent has Socially Responsible Investment (SRI) developed unevenly across countries with different corporate governance systems and how might we explain this? Second, what consequences does its uneven development have for human resource management (HRM)?

papers.ssrn.com/sol3/papers.cfm?abstract_id=1235538

[Sapphire Capital]

Are Socially Responsible Managers Really Ethical? Exploring the Relationship between Earnings Management and Corporate Social Responsibility

Diego Prior
Autonomous University of Barcelona - Faculty of Economics and Business Studies

Jordi Surroca
Universidad Carlos III de Madrid - Department of Business Administration

Josep A. Tribo
Universidad Carlos III



Corporate Governance: An International Review, Vol. 16, Issue 3, pp. 160-177, May 2008


Abstract:
This study offers insights for policy makers and managers interested in enhancing CSR. For managers, our findings suggest that projecting a socially-friendly image in order to disguise earnings management cannot be sustained over time due to the detrimental effect on financial performance. In addition, this study provides a warning signal to policy makers that certain practices geared toward raising a firm's CSR may simply be a mechanism for hindering other devious practices. This study draws on a generalized agency theory where managers are seen as the agents of all stakeholders and the earnings management literature to highlight that CSR can be used to garner support from stakeholders and, therefore, provides an opportunity for entrenchment to those managers that manipulate earnings. As such, it suggests new avenues of research for both the corporate governance literature, as well as for the stakeholder perspective. Using archival data from a multi-national panel sample of 593 firms from 26 countries between 2002 and 2004, we find a positive impact of earnings management practices on CSR; this relationship holds for different robustness checks. Also, we demonstrate that the combination of earnings management and CSR has a negative impact on financial performance. This paper investigates the connection between earnings management and corporate social responsibility (CSR). We argue that earnings management practices damage the collective interests of stakeholders; hence, managers who manipulate earnings can deal with stakeholder activism and vigilance by resorting to CSR practices.
papers.ssrn.com/sol3/papers.cfm?abstract_id=1235540